Shell, BASF wrap up $5.7B sale
Friday May 6, 6:00 am ET
A Russian-born oil billionaire and a low-profile Indian businessman snapped up Basell NV , the world's biggest maker of a key ingredient in plastics, for €4.4 billion ($5.7 billion) on Thursday, May 5, a day after an Iranian suitor said it was unfairly muscled out of the running.
Hoofddorp, Netherlands-based Basell, jointly owned by oil major Royal Dutch/Shell Group and German chemicals giant BASF AG , had been on the block since July and had seen lively bid interest not only from Iran but also from China and the U.K., as well as American buyout shops.
New York-based Access Industries , owned by Len Blavatnik, and Chatterjee Group , controlled by Purnendu Chatterjee, will buy 100% of Basell including €2.2 billion in debt. India's ICICI Ventures , a private equity investor which was earlier part of the buying consortium, pulled out at the last minute, sources said. BASF and Shell said they expected the deal, subject to regulatory approvals, to close by the end of 2005.
Basell, the top producer of polypropylene and the European leader in polyethylene, reported sales of €6.7 billion in 2004. It employs 6,600 across its production facilities in 21 countries and in the 120 countries it sells to. The chemicals are the building blocks of plastics used in personal computers to plastic bags.
BASF and Shell established Basell as an independent company in 2000 to consolidate their worldwide polyolefin businesses across the world.
For Shell, the sale is a major step in its strategy to dispose of up to $15 billion of assets as it restructures after a scandal last year in which it acknowledged overstating proven oil reserves. The deal enables Shell to "strengthen our core portfolio in Europe and North America, and to grow in Asia and the Middle East," said Fran Keeth, Shell Chemicals Ltd.'s executive vice president, in a statement.
Lazard advised BASF in the transaction, while Shell retained Credit Suisse First Boston . Chatterjee Group did not return calls.
Peter Thoren, an Access Industries spokesman, declined to reveal advisory details or how Basell would be divided between its new owners.
Access is making a bet on an upturn in the petrochemicals business, which has been battered in recent years by record oil prices. "We are experienced in industrial investments in companies that compete in large, cyclical markets, and we believe Basell is an attractively positioned global business with an excellent future," Blavatnik said in a statement. Thoren described Thursday's deal as a "long-term, strategic investment" for Access.
Nonetheless, Standard & Poor's Ratings Services on Thursday lowered its long-term corporate credit rating on Basell a notch with a "negative" outlook until the new owner's capital structure is revealed.
Blavatnik, who emigrated to the U.S. in the late 1970s, is a large shareholder in Russia's third-largest oil company, TNK-BP , formed in 2003 through the merger of two Russian companies with BP plc 's Russian oil assets. Blavatnik, a Harvard University business graduate, also has a stake in OAO Siberian-Urals Aluminium Co. , which ranks among the world's top 10 aluminum producers.
The investment duo was "the last credible bidder left standing in the deal," said an investment banker in Mumbai.
Iran's National Petrochemical Co. alleged Wednesday the U.S. had pressured Basell's owners to keep it out of the buying fray, given ongoing U.S. sanctions against Iran, which it deems a state sponsor of terrorism. "Although NPC won all aspects of the Basell tender, due to U.S. pressures we are unofficially told Iran cannot buy Basell," the Iranian company's managing director, Mohammad Reza Nematzadeh, told semiofficial Iranian news agency ISNA.
Besides NPC, Beijing-controlled PetroChina Co. Ltd. , British entrepreneur Jim Ratcliffe's privately held chemical company INEOS Chlor Ltd. and a consortium of four U.S. private equity firms - Blackstone Group LP , Apollo Management LP , Bain Capital LLC and Goldman Sachs Capital Partners - were also in the running for Basell, sources said.
Chatterjee, who splits his time between an apartment overlooking Central Park in New York and a swank house in a tony part of Kolkata, India, is the main shareholder of India's Haldia Petrochemicals Ltd. , a plastics-making company he started along with the state government of West Bengal and Indian conglomerate Tata Group . Debt-laden Haldia is working on a restructuring package.
A graduate of the famed Indian Institute of Technology with a Ph.D. from the University of California, Berkeley, Chatterjee worked with McKinsey & Co. for a decade till 1986 before joining hands with George Soros in the Hungarian-born billionaire's global funds management business. Soros is a backer of Chatterjee Group's projects in India, including a software services joint venture with Islandia, N.Y.-based Computer Associates International Inc.
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